15+ Average Small Business Revenue + Profit Margin Statistics [2023] - Zippia (2023)

Research Summary: Given that small businesses comprise over 99% of all American businesses, it’s important to understand average revenue and profit margins. Whether you’re a self-employed business owner or have a few employees, here are some crucial small business revenue and profit margin facts:

• The average small business in the US makes $53,000 in revenue.

• 81% of US small businesses have no employees.

• Annual revenue for a self-employed business with no employees in the US is $44,000.

• The average revenue for a business with employees can range from $387,000 to $40.7 million, depending on the number of employees.

• The average small business profit margin is anywhere from 7% – 10%.

For further analysis, we broke down the data in the following ways: Small Business Profit | Revenue + Profit Challenges | Business Owners

Small Business Revenue Statistics

Average small business revenue can depend on a lot of factors, from the number of employees to the demographics of the owner. To find out more about these differences, here are some key facts:

• Small businesses with five to nine employees have an average annual revenue of $1.08 million.

  The average small business has ten employees or fewer, meaning that most make less than $1 million. Here is the average revenue by employee count in more detail:

  Average Small Business Revenue By Number Of Employees

  Number of employees	Average annual income
  1-4	$347,000
  5-9	$1.08M
  10-19	$2.16M
  20-99	$7.12M
  100-499	$40.77M

• The average small business makes $100,000 in revenue per employee.

  Though, this varies wildly by the average number of employees, with smaller companies (less than $1 million in revenue) earning an average of $43,000 per employee and large businesses (up to $50 million in revenue) earning up to $230,000 per employee.

  Average Small Business Revenue Per Employee

  Average annual revenue	Average revenue per employee
  Less than $1 million	$43,000
  Up to $50 million	$230,000
  Average	$100,000

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• 86.3% of small businesses earn less than $100,000 of annual revenue.

  That means only 13.7% of small businesses make over $100,000 per year, showing that the vast majority of small businesses have no employees.

• On average, female small business owners have 40% less than male small business owners.

  For example, the average female small business owner who’s been in business for two years makes $59,000 in revenue per year. Meanwhile, similar male small business owners make an average of $91,000.

  Average Small Business Revenue By Gender Over Time

  Number of years in business	Female average annual revenue	Male average annual income
  One year	$50,000	$75,000
  Two years	$59,000	$91,000
  Four years	$68,000	$104,000

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• On average, Black small business owners make 11% less than Asian small business owners.

  White and Asian small business owners make the highest annual revenue on average in the US, at $55,549 and $56,808, respectively. On the other hand, Black small business owners make the least, at an average of only $50,539.

  Average Small Business Revenue By Race/Ethnicity

  Race/Ethnicity	Average annual revenue
  Asian	$56,808
  White	$55,549
  Hispanic/Latino	$53,705
  Black	$50,539

• 18-34-year-old small business owners make 6% more on average than 35-64-year-olds.

  Typically older Americans make more than younger Americans, but this isn’t the case for small business revenue. The average small business run by an 18-34-year-old makes $81,300, while the average small business run by a 35-64-year-old makes $76,500.

Average Small Business Profit Statistics

Revenue is not necessarily the same as profit, as businesses need to take their expenses into account to be successful. To understand the average profits for small businesses in the US, here are some average statistics:

• The average profit margin for businesses is between 7%-10%.

  10% is most often considered a healthy profit margin, while margins as high as 20% are considered high. When it doubt, each business’ profit margin will depend on factors like the type of industry, the number of employees, and whether goods or services are being sold.

• Only 40% of businesses are profitable at some point.

  While approximately 30% start losing money, and 30% break even. This means profitable small businesses are less common than unprofitable ones.

• The average profit per employee is only $10,215.

  Despite companies earning up to over $200,000 in revenue from employees, the actual profit received from employees can be much smaller.

• The Financial Services industry has the largest net profit margin of 32.33%.

  While comparably, the Hotel & Gaming industry has the lowest average net profit margin of -28.56%.

Average Business Profit Margins By Industry

Small Business Revenue and Profit Challenges

Trying to earn healthy revenue as a small business owner comes with many challenges, and unfortunately, these challenges can lead to failure for many. To dive deeper into these challenges, here are some facts you should be aware of:

• It takes the average business two to three years to become profitable.

  Preparing for a few unprofitable years is vital for small businesses, as those who run out of money after their first or second years are typically the first ones to fail.

• 82% of small businesses fail due to cash flow issues.

  Cash flow is the number one risk for small businesses, but it’s also typically a broad symptom of other underlying causes. Some of these causes include:

  • Not having a minimum viable budget (overspending)

  • Poor credit or putting off payments

  • Poor inventory management

  • Lack of cash reserves

  • Not having an accountant

• 50% of new businesses fail within the first five years.

  The business failure rate at one year is 22%, which rises to a whopping 65.7% by year ten. Unfortunately, the majority of small businesses in the US do fail after their fifth year.

  Small Business Failure Rate Over Time

  Years in business	Failure rate
  1	21.9%
  2	31.8%
  3	39.7%
  4	49.7%
  5	50.0%
  6	53.6%
  7	57.7%
  8	61.0%
  9	63.2%
  10	65.7%

Business Owner Statistics

Every business owner is chasing success, but what is the reality for American business owners? Here are some essential facts you should know:

• The average income of a small business owner is $50,934 in 2023.

  More specifically, the top 90% of small business owners make $94,000 or more, while the bottom 10% make $27,000 or less.

• Only one in 20 small businesses make over $1 million in revenue.

  Only around 5% of small businesses will ever surpass $1 million, making it an unlikely occurrence for the majority of business owners.

Small Business Revenue FAQ

1. What is a good profit margin for a small business?

   A good profit margin for small businesses is anything above 10%. The average profit margin for small businesses is 7% – 10%, but a great margin is closer to 20%.

   However, realistically profit margins can vary greatly depending on the industry, the number of employees, and more.

2. What small businesses have the highest profit margins?

   Large businesses (up to 500 employees) in the Financial Services industry have the highest profit margins. These margins are over 30% on average, putting large companies in this industry far above the average.

   In more detail, here are the top five industries by average profit margins:

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   • Financial Services: 32.33%

   • Software (Entertainment): 29.04%

   • Tobacco: 20.58%

   • Software (System & Application): 19.66%

   • Computers & Peripherals: 18.72%

   Conversely, here are the bottom five industries by profit margin:

   • Hotel & Gaming: -28.56%

   • Green & Renewable Energy: -19.78%

   • Software (Internet): -10.36%

   • Drugs (Biotechnology): -0.62%

   • Food Wholesalers: 0.69%

3. How much revenue does the average small business make?

   The average small business makes $53,000 in revenue. 81% of these businesses are run by an owner with no employees, who make less on average. For example, the average revenue for a business with no employees is $44,000, compared to $387,000 for businesses with only one to four employees.

   To understand just how much the number of employees is connected with higher revenue, here is the average revenue by the number of employees:

   Number of employees	Average annual income
   0	$44,000
   1-4	$347,000
   5-9	$1.08M
   10-19	$2.16M
   20-99	$7.12M
   100-499	$40.77M

4. How many times revenue is a small business worth?

   The average small business worth is 2x the sales revenue. However, worth can realistically range anywhere from 1x to 8x larger, with the most successful companies being worth far more than their revenue.

   With this in mind, a moderately successful company with a revenue of $2 million might be worth $4 million, while a highly successful company with the same revenue could be worth as much as $16 million.

Conclusion

Small businesses are a major cog in the wheel of the US economy, and the owners of these businesses rely on their skills and expertise to make a living. For businesses with no employees, the average revenue is $44,000, while businesses with employees can see revenues anywhere from $387,000 to $40.7 million.

While the average profit margin for small businesses is 7% – 10%, the unfortunate fact is that only 40% of them are, in fact, profitable, and only 50% will survive past their fifth year.

However, these facts shouldn’t discourage small business owners, as with the right planning, proper financing, and good credit, any business owner can ultimately succeed.

References

1. Flora Financial – Average Small Business Revenue: What To Know

2. TKE – What Is The Average Profit Margin for a Small Business in North America?

3. LaConte Consulting – Financial Facts About Women-Owned Business

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4. Zippia – Business Owner Demographics and Statistics in the US

5. Tipalti – Profit Per Employee

6. Polymer – What is a Good Gross Profit Margin? (2023)

7. FreshBooks – How Long Does It Take a Business to be Profitable? A Guide

8. Score – The #1 Reason Small Businesses Fail – And How to Avoid It

9. Zippia – What Percentage of Small Businesses Fail? [2023]: Top Reasons and Failure Rate

10. Zippia – Business Owner Salary

11. E+A – Only 1 in 20 Businesses Surpass $1 Million In Annual Revenues. Here Are 5 Reasons Why

12. Doerhoff & Associates CPA – What to Know About the Average Small Business Profit